USCB Financial Holdings, Inc.

Good morning and welcome to the USCB Financial Holdings Fourth Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Lou Della Aguilera, President and CEO. Please go ahead.

Good morning, and thank you for joining us for USDB Financial Holdings' fourth quarter 2024 earnings call. With me today, reviewing our Q4 highlights, is CFO Rob Anderson and Chief Credit Officer Bill Turner, who will provide an overview of the bank's performance, the highlights of which commence on slide three. Our results in Q4 2024 highlight a record year for the bank as Team USAB outperformed our internal budget and delivered impressive results for our shareholders. A year ago, we posted 14 cents per share in diluted EPS in Q4 2023 and more than doubled these earnings this quarter to 34 cents per share Our continued focus on reducing deposit costs has contributed to net interest margin expansion, helping us maintain solid profitability. Benefiting from Florida's strong, resilient, and growing economy, USCB continues to pose strong gains in assets, deposits, diversified quality loan production, and profitability. Our performance underscores our disciplined execution of a business plan focused on commercial banking initiatives designed to profitably expand existing client relationships and grow new ones. In reviewing our Q4 highlights, I will comment on a select few data points as CFO Anderson will further detail our growth, profitability, capital, and liquidity positions. Driven by our various deposit-focused business lines, average deposits increased 225 million, or 11.8%, compared to the fourth quarter of 2023. These business verticals, which target deposit-rich private clients, attorneys, medical professionals, as well as correspondent and association banking have grown to over 625 million representing 30% of total deposits as of the end of the past quarter. Average loans increased 260 million or 15.3% compared to the fourth quarter of 2023. Our loan pricing has moved in line with the market as loan coupon rates decreased seven basis points compared to the prior quarter while increasing 46 basis points compared to the fourth quarter of 2023. As we look at profitability, net income was $6.9 million or $0.34 per diluted share, an increase of $4.2 million or 153.7% compared to the fourth quarter of 2023. Similarly, net interest income before provision increased $5 million or 34.7% for the past quarter in comparison to the fourth quarter of 2023. ROAA was 1.08% for the fourth quarter of 2024 compared to 0.48% for the fourth quarter of 2023, while ROA was 12.73% for the past quarter, again, compared to 5.8% for Q4 2023. Given the earnings power of the company, our outlook for 2025, and the strong capital levels, the board approved on January 21st, 2025, to double the quarterly cash dividend to 10 cents per share of the company's Class A common stock, The dividend will be paid on March 5th, 2025. The cash dividend program is an important driver to shareholder value and the board of directors is committed to the return of capital to our investors while maintaining a strong balance sheet. The following page is self-explanatory. Directionally showing historical trends since recapitalization. The disciplined execution of our business plan focused on developing the best people, products, and processes has consistently delivered efficient profitable performance guided by conservative risk management practices. So now let's turn our attention to our specific financial results and key performance indicators, which will be reviewed by our CFO, Rob Anderson.

Okay, thank you, Lou, and good morning, everyone. Looking at pages five and six, I've characterized Q4 as another fantastic quarter for USDB. Net income was $0.34 per diluted share, and absent the non-recurring expenses would have been $0.38 per share, and another record quarter for USDB. However, as reported, return on average assets was 1.08%, return on average equity was 12.73%, the NIM was 3.16%, and up 13 basis points from the prior quarter. The efficiency ratio was 55.92%, and adjusted for the non-recurring expenses would have been 51.41%. Tangible book value per share retreated $0.09 to $10.81, driven by a higher AOCI interest rate mark and higher share count. And last, credit metrics remained benign. So with that overview, let's discuss deposits on the next page. Deposits continue to increase both on a linked quarter and year-over-year basis. We have used excess liquidity to fund loan volume and walk away from rate-sensitive deposits and single-service product clients. Deposits decreased 18 basis points this quarter, and the reduction in our cost of funds has been a fundamental driver in our net interest margin improvement. So with that, let's look at the loan book. Average loans increased $80.3 million, or 17% annualized compared to the prior quarter, and $260 million, or 15.3% compared to the fourth quarter of 2023. Additionally, as we book new loans at yields above the portfolio average, our overall loan yields will remain stable or increased in the next couple of quarters as we continue to book loans with coupons above 7%. As a reminder, we book all loans with floors and prepayment penalties, which should help us in a down rate scenario. As for guidance, we expect loan growth to be in high single digits to low double digits going forward, particularly since we have experienced high interest rate volatility in the last couple weeks. Turning to page nine, you can see for the past five quarters, we have originated $754 million in new loans. And for the fourth quarter, we have originated $161 million, achieving a record quarter in terms of loan production, with a loan coupon of 7.14%. And in the last five quarters, our weighted average coupon was 7.79%, which helped increase our yield on earning assets. And while the loan coupon ticked down this quarter, it is still 89 basis points above the portfolio average. Also worth noting is that we have been able to diversify our loan book over time. As of quarter end, non-real estate loans are 27% of the total loan book. Let's look at the margin. One of the most impressive accolades this year is the success story of the NIM. In 2024, our NIM went from 2.62% to 3.16%. an improvement of 54 basis points in a matter of three quarters. Equally impressive has been the improvement on net interest income. Compared to the fourth quarter of 2023, net interest income increased 5 million or 34.7%. As we enter 2025, this increase will generate significant earnings power going forward. The drivers include a lower deposit cost, larger balance sheet, higher loan yields, and an improvement in our earning asset mix. Going forward, We believe the NIM will hover around current levels near term, but we can expect further expansion in 2025 given a more normalized yield curve. Moving on to page 11. According to our ALM model, the bank's balance sheet is neutral for year one as we have made strategic changes in the last couple quarters to prepare for a lower rate environment. Most notably, we have favored money market retention rates over long-term CD rates. We have focused on three to six-month CD terms Moreover, we will adjust the term of our liabilities depending on the current expected interest rate scenario. For now, we are aiming for a neutral balance sheet. One of the benefits of having a neutral balance sheet is that the bank's financial performance can be more predictable in an uncertain rate environment. As mentioned on earlier calls, we have also pruned the balance sheet from rate-sensitive deposits and single-service product clients. During the last couple of quarters, we have adjusted down our deposit rates without losing meaningful relationships, this has translated into a more resilient balance sheet. Additionally, if the Fed Fund's rate does drop this year, that will help our deposit costs, and with the rise in the 5, 7, and 10-year rates, will help new origination loans at higher rates. In short, this will give us a more normalized yield curve, which is great for the banking industry in general, but will really benefit benefit us as we tend to book loans at five years fixed rate with a spread over the U.S. Treasury rates. With these changes, we believe our NIM performance can hold at the current levels near term and expand into 2025, especially if the yield curve normalizes. With that, let me turn it over to Bill to discuss asset quality.